Wednesday, March 24, 2010

Selling apples is not that easy

It's not easy to do business and make money. The dialogue below from a Baidu.com electronic bulletin board about an idea to make money selling apples shows the market economy in action. If there was money to be made, someone would have made it already. The posting is over 3 years old, but the grizzled veteran's advice is still true. The respondent is sarcastic, but in the end he takes time to give the inquirer some practical and specific suggestions.

This posting illustrates (1) the vast number of people looking for ways to make a buck in China, (2) the hyper-competitiveness of the market, (3) and the efficiency of the market. There is no easy money to be made.

Question posted December 4, 2006:

I’m a third-year student at South China Normal University. I have a classmate who is in Hebei Province who told me apples there are very cheap—the price is 1 kuai per jin sold in bulk. Around our school (in Guangzhou) apples sell for 2.5 yuan per jin, so I’d like to buy some apples from Hebei to transport for sale here. Our problem is the transportation cost and insurance. Selling them in Guangzhou will be no problem. We’re not familiar with the other things.

Response:

Little friend, business is not that easy. Why are people in the fruit wholesale business not taking advantage of such a big money-making opportunity—are they waiting for you to come?

Have you considered the following issues:1. Your 1 kuai and 2.5 kuai are retail prices. Do you know what the wholesale price is? Perhaps the Guangzhou apples you’re talking about were brought in from Hebei. After you add the transportation, warehousing, and labor costs you might end up paying 2.5 yuan. Have you worked this out?

2. Your 10 tons of apples will be bought wholesale. Do you have distribution channels? Other fruit traders have long-standing relationships. On what basis will they take fruit from you?

3.Do you have a permit for entering the market? Health and disease prevention approval? A business license? If you don’t, your 10 tons of apples will just rot waiting for them.

Have you calculated the costs of the business? Labor cost, warehouse rent, spoilage rate, etc. You finally might have to sell for 2.8 yuan to cover the costs. Have you got a strategy if that happens?

If you have considered all these things, and feel there’s no problem, then go ahead. Truck freight is not suitable; the cost is too high. The cost to Shijiazhuang is no less than 300 yuan per cubic?. You could ship by train, but you would need [a whole car] and this way it would probably take a week. By container it would take at least half a month. You need 60 tons to ship by rail car.

If you ship by truck you had best find a [truck team?]. You can find one on the Internet. They can provide insurance, and damage may be compensated according to price.

For shipping by train you can look for a freight [forwarder?] [He recommends a company in Guangzhou]

Another Response:

The message above is right. You should think carefully. Business is not as simple as you think.